Investors retreat from housing market as prices heat up

Investors, who have been an important chunk of the housing market’s recovery, are shrinking as a share of existing-home sales.

With spiking home prices (one gauge says they rose 13.4% in 2013), it’s harder to get an attractive deal.

“Not only are fewer deals available, but once found, the deals are not as sweet: as supplies of distressed homes contract, the discount has narrowed,” economists at IHS Global Insight wrote in a Thursday research note.

A preliminary estimate from NAR spokesman Walter Molony indicates that investment properties made up about 22% of home sales last year, down from 24% in 2012 and 27% in 2011.

When investors buy a property, they’re looking to make a nice return, rather than, say, a home that has enough room to accommodate a growing family. So it makes sense that 2013’s skyrocketing prices are slowing their purchases.

“We think a lot of the big pop in housing has gone out,” Stephen Schwarzman, chief executive of Blackstone Group, which has bought at least $7 billion worth of houses, said Wednesday on CNBC. “For us an exposure in the $7-to-$8 billion range is big enough.”

The low-price properties that investors liked to scoop up are seeing dropping sales trends, according to NAR data released Thursday.

Sales of single-family existing homes priced between $100,000 and $250,000 (this range includes the median price of $189,200) fell 7.2% in February from the year-earlier period. Meanwhile, sales of homes between $250,000 and $500,000 rose 1.9% over the past year.